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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
In the EMS before September 1992, the Italian lira/DM exchange rate could fluctuate by up to 2.25 percent up or down. Assume that the lira/DM central parity and band were set in this way and could not be changed. What would have been the maximum possible difference between the interest rates on one-year lira and DM deposits? What would have been the maximum possible difference between the interest rates on six-month lira and DM deposits? On three-month deposits? Do the answers surprise you? Give an intuitive explanation.
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